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UK Supreme Court’s key insurance ruling

The UK Supreme Court has ruled in favour of firms affected by COVID-19 restrictions who were seeking to claim for losses under business interruption clauses in their insurance policies.

The judgment followed a test case brought to the High Court in London by the Financial Conduct Authority (FCA) with the agreement of eight insurance companies.

The FCA, along with six insurers and a group of policy-holders, appealed aspects of the High Court ruling to the UK Supreme Court.

FBD test cases

The UK ruling is set to play a role in a similar test cases taken by a number of Irish pubs against insurer FBD.

Earlier this week, the High Court deferred delivering its judgment in these cases in order to allow lawyers for the parties to make further legal submissions arising from the UK judgment.

The UK Supreme Court judges examined a number of clauses in the insurers’ policies. In one part of their ruling, they rejected the High Court‘s finding that a requirement to pay out is satisfied only by a restriction “expressed in mandatory terms which has the force of law”.

'Threat of legal compulsion'

They said this was too narrow, and that an instruction given by a public authority may amount to a “restriction imposed” if it carries “the imminent threat of legal compulsion or is in mandatory and clear terms and indicates that compliance is required without recourse to legal powers”.

The judges also ruled that all the individual cases of COVID-19 which had occurred by the date of any UK government measure were equally effective “proximate” causes of that measure.

“It is therefore sufficient for a policyholder to show that at the time of any relevant government measure there was at least one case of COVID-19 within the geographical area covered by the clause.” they said.